Shares of Darden Restaurants are soaring 6%, after the company forecasted 2Q earnings in the range of $0.65 to $0.75 per share, surpassing the Street consensus of $0.35 per share.
The restaurant chain operator expects its revenues to be 82% of last year’s sales of $2.06 billion, which would be about $1.69 billion in the November-ending second quarter. Meanwhile, analysts had expected 2Q revenue of $1.77 billion.
Darden Restaurants’ (DRI) 1Q revenue fell 28.4% to $1.53 billion year-over-year, missing the Street consensus of $1.56 billion. The company suffered a 29% decline in same-restaurant sales, partially offset by the addition of 14 new restaurants in the quarter ending on Aug. 30. It reported 1Q EPS of $0.56 per share, which blew past analysts’ estimates of $0.05 per share. However, EPS fell from the prior-year quarter’s earnings of $1.38 per share.
In addition, Darden declared a cash dividend of $0.30 per share, which will be payable on Nov. 2 to shareholders of record as of close of business on Oct. 9. (See DRI stock analysis on TipRanks)
On Sept. 21, just ahead of 1Q results, Stephens analyst James Rutherford lowered his 2Q estimates slightly but maintained a Buy rating and a price target of $98 (8.9% upside potential), calling Darden a “top pick.” The analyst is confident that the company can deliver higher average unit volumes and margins in the post-pandemic period and “should be worth at least its pre-COVID multiple.”
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 16 Buys and 7 Holds. The average price target of $92.95 implies upside potential of 3.3% to current levels. Shares have declined by 16.6% year-to-date.
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